If the government really wants to see more new homes delivered, all they have to do is plan for it, argues Paul Smith
300,000 is a number seared on the mind of everyone involved in housing development. The annual house building target first appeared in a House of Lords select committee report in 2016. It came to prominence the following year when then-chancellor Philip Hammond delivered his Autumn Budget, before reappearing in the Conservative’s manifesto for the 2019 general election.
It is still repeated by ministers - yet we’re not remotely close to achieving it.
Despite all the rhetoric about solving the housing crisis, the net supply of new homes peaked at just 242,000 in the year before the pandemic and has tailed off since. A third of local authorities failed the most recent Housing Delivery Test - despite being measured against targets averaging around just 200,000 homes a year.
That lack of housing delivery is presented by some as an intractable, complex problem with myriad causes – but most of those causes fail to survive even the most cursory scrutiny.
Land banking is a favourite explanation for many; developers are sitting on land with planning permission in an effort to drive the price of new homes ever upwards.
Except it doesn’t happen.
Over the past 18 years, there have been five independent reviews into the practice and an Office of Fair Trading investigation. None found evidence that land banking occurs.
Despite that evidence (or lack thereof), each year the Local Government Association (LGA) publishes a press release pointing to the gap between the number of planning permissions granted and the number of new homes built in an effort to lay the blame for the housing shortage at the door of developers.
And, every year, it is pointed out that they have calculated the figure by using Office for National Statistics (ONS) data in a way the ONS explicitly say it isn’t fit for. The analysis is riddled with other errors too, such as double counting permissions where sites have been re-planned.
The LGA also conveniently ignore what Sir Oliver Letwin described as “absorption rates” in his 2018 review of housing delivery. Whilst the demand for new homes across England is vast, the demand for a specific house type in a specific location at a specific point of time is finite. No matter how quickly developers build, they can’t sell homes faster than that rate.
Letwin’s analysis points to the solution. The way for the rate of housing delivery to be increased is to ensure that developers can operate from more outlets – allowing them to sell into a wider range of micro-markets.
Which brings us to the crux of the problem – there simply aren’t enough sites with planning permission for new homes.
That supply of sites is managed by the planning system. Although the system is undoubtedly in a mess – underfunded, inefficient and labyrinthine – systemic changes aren’t a silver bullet. They will help, but they will take time and – as the government has already seen – are likely to encounter stiff opposition.
The real problem is much simpler than that. All the local plans in England are aiming to deliver a total of around 190,000 new homes each year – well below the totemic 300,000 figure. It should therefore be no surprise that there are too few sites with planning permission and that too few homes are being delivered. That’s exactly the outcome our local plans are aiming to deliver.
The ongoing debate around housing targets doesn’t help either. In the north of England – where the current version of the government’s housing target calculation produces figures which are below historic delivery levels – local authorities are rushing to review local plans to “lock in” those lower figures. In the south of England – where the same formula has pushed housing targets upwards – local authorities are halting plan-making in the hope the government might reduce their targets.
The result is further downward pressure on housing delivery.
The good news is that this all means the answer to boosting housing delivery is surprisingly simple. Set housing targets for each local authority that total at least 300,000 homes ayear, and then stick to them. The result will be more sites with planning permission, more sales outlets for developers and more new homes delivered. If the government really wants to see more new homes delivered, all they have to do is plan for it.
Paul Smith is managing director at Strategic Land Group